Goldman Sachs predicts collapse of Bitcoin

03/13/2018

Head of the department of technological development of the investment bank Goldman Sachs Sheba Jafari informed the organization's clients that if the price of bitcoin cannot hold on at around $ 9,210 in a short time, then the probability of falling to $ 5,922 and lower at the February minimum will increase, Business Insider reports.

David McBee via flickr

"The breakthrough of this level implies a further downward impulse. The next significant levels are at $ 7,667 and $ 7,198. If the price approaches these levels, then it is structural damage, and the risk of falling to new local bottoms below $ 5,922 will be great. In this situation, the market needs to overcome and gain a foothold above $ 9,322 (February 26 minimum) in order to stabilize," Jafari wrote in a newsletter to clients.

In the message, analysts stressed that the changes in the rate may be caused by excessive exposure from investors. Most likely, newcomers will cause the greatest impact on the price of the crypto currency.

However, the bank's forecasts do not always come true. Jafari’s department has already issued a warning for customers, urging them to monitor the cost of bitcoin, predicting a decrease to $ 7,198, reports The Cointelegraph. The January report of Goldman Sachs said that the growth of the crypto currency had already come "beyond the bubble" and the cryptomania eclipses not only the "bubble" of dotcoms, but also the tulipmania of 1634-37.

"The craze surrounding crypto-currencies is probably even better illustrated by the price jumps observed after a company announces its relation to blockchain or cryptocurrencies," Goldman Sachs writes.

However, with this statement Goldman Sachs supported the general mood among the majority of bankers who hold the same opinion. The market of crypto currency has grown exponentially since the beginning of 2017. At the same time, the capitalization of the market in general and the dominant Bitcoin, in particular, is largely based on expectations and hopes.

Experts compare the current stage of the development of the crypto-currency market with the beginning of the twentieth century, recalling the banking panic of 1907, and the creation of the US Securities and Exchange Commission (SEC) in 1934. As in today's crypto-currency market, the financial world was then shaken by scandals with insider trading, newcomers invested money in extremely dubious projects, and all this confusion almost led the US to bankruptcy and became the beginning of the Great Depression.

Goldman Sachs, however, recognizes some of the advantages of crypto and blockchain: "The concept of digital currency, which uses the blockchain technology, is viable, taking into account the advantages it can provide: simplicity of transactions at the global level, reducing transaction costs, reducing corruption and security."

At the same time, Goldman Sachs denies having key advantages with bitcoin. "Not only Bitcoin is not easy to use, but it often takes up to 10 days to make calculations." At the end of 2017, price divisions in 17 American exchanges for 1 bitcoin reached $ 4,156, or about 31% between the highest and lowest price. The commission soared to the skies, and frequent hacking caused the devastation of entire purses and stock exchanges, "analysts at Goldman Sachs wrote.

Goldman Sachs sees no prospects for crypto currency in the future, but also claims that even if there is a crisis in the bitcoin system, this will not significantly affect the economy: "We believe that the collapse of bitcoin will not have a negative impact on the global economy or financial markets. At the peak of the dot-com bubble in March 2000, the combined capitalization of the shares of the information technology companies Nasdaq and S&P 500 accounted for 101% of the US GDP and 31% of the world GDP. The total capitalization of crypto-currencies is 3.2% of US GDP and 0.8% of world GDP."

Head of Investment Studies at Goldman Sachs Steve Strongin said that after the January and February corrections most crypto currency "will not survive" in its current form. In his view, most digital assets have no long-term prospects, in part because of the low transaction speed, security problems and high maintenance costs.